In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Batteries Plus franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Batteries Plus franchise, based on Item 7 of the company’s 2021 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Batteries Plus franchise, based on Items 5 and 6 of the company’s 2021 FDD

• Section IV – Number of franchised and company-owned Batteries Plus outlets at the start of the year and the end of the year for 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD

• Section V – Presentation and analysis of Batteries Plus’ financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:

• July 1, 2020 to June 30, 2021 average merchandise margin for the 591 franchised Batteries Plus Stores that were in operation for the entire 12-month period ended June 30, 2021

• July 1, 2020 to June 30, 2021 average merchandise margin for retail and commercial customers for the 601 franchised Batteries Plus Stores that were open as of June 30, 2021

• July 1, 2020 to June 30, 2021 average retail and commercial revenue as a percentage of total revenue for the 601 franchised Batteries Plus Stores that were open as of June 30, 2021

• July 1, 2020 to June 30, 2021 impact of commercial net revenue and retail cross-selling activity on overall average store net revenue based on the results of the 591 franchised Batteries Plus Stores that were in operation for the entire 12-month period ended June 30, 2021

• July 1, 2020 to June 30, 2021 average sales ticket amount and adjusted lines per ticket based on the results of the 591 franchised Batteries Plus Stores that were in operation for the entire 12-month period ended June 30, 2021

• July 1, 2020 to June 30, 2021 average, median, highest, and lowest net revenue for the 99 corporate, 591 franchised, and 690 corporate and franchised Batteries Plus Stores that were in operation for at least 12 full months as of June 30, 2021
  

• July 1, 2020 to June 30, 2021 average net revenue, cost of goods sold, gross profit margin, wages and compensation, selling expense, delivery expense, facilities and office, admin expense, marketing, royalties, and EBITDA for the 78 company-owned Batteries Plus Stores that were in operation for at least 12 full months as of June 30, 2021 and that the franchisor’s affiliate owned for the entire 12-month period

Section I – Background Information

22 Things You Need to Know About the Batteries Plus Franchise

Promotes Joe Malmuth to VP of Franchise Development and Relations Amidst Substantial System-Wide Growth

1.  In late June 2021, in response to the 30-plus store openings and the signing of 55 new franchise agreements at that point in the year, Batteries Plus announced the promotion of one of its key leaders, Joe Malmuth, to vice president of franchise development and relations. This announcement came on the heels of two incredible quarters of growth for the company including the largest multi-unit development agreement in brand history.

2.  Malmuth ascended the leadership ladder from his previous position of managing director of franchise development, a title he held since joining the Batteries Plus team in May 2020. Over the past year, Malmuth has been responsible for overseeing all aspects of franchise development. In addition to working with new owners and franchise consultants to expand the system, he has also been managing programs focused on helping current owners develop territory and facilitate transactions.

3.  In the year since his hiring, Malmuth has driven the development strategy for the brand, inking franchise agreements that will continue to bring new Batteries Plus stores to communities across the county. Malmuth said, “We’re seeing more than 70 people a week inquire about joining our brand, and we have started weekly Discovery Days to handle the amount of interest in joining Batteries Plus.”

4.  Prior to joining Batteries Plus, Malmuth served as vice president of franchise relations at My Eyelab, an optical retail franchise, and prior to that position, he worked for six years at United Franchise Group, which consists of a number of business-to-business brands and franchise development services.

5.  Jon Sica, chief strategy and development officer of Batteries Plus, said, “The past year has been a tremendous time in our brand’s history. From successfully navigating the pandemic with our offering of essential products and services to signing the largest franchise agreement our brand has ever seen, we can directly attribute our success to the work Joe and his team have done. I’m looking forward to seeing Joe continue to make a big impact on our franchise and am confident we will see another record-breaking year in 2021 as a result.”

Expands Store Development Team

6.  In mid-November 2021, Batteries Plus made substantial changes to its store development team in response to the strong third quarter which saw the signing of 20 new store agreements. To aid in the forward momentum of the development team, Kirtis Hill was promoted to chief retail growth officer in February 2021. In this role, Hill works directly with franchisees to optimize store growth in markets nationwide, while providing leadership to enterprise teams working on high-priority strategic initiatives to drive sales and profitability.

7.  “Kirtis’ background in both strategy and analytics, and his boots-on-the-ground approach to working with franchisees, makes him the perfect fit as the quarterback of our most important growth initiatives,” said Jon Sica, chief strategy and development officer of Batteries Plus.

8.  Jason Moss was also promoted to director of real estate and has brought on a new real estate manager, Mary Hardin Rathel. In her role, Hardin Rathel will be focused on visiting franchisees and providing them support during the site-selection process. In Moss’ new role, he will leverage his skill at negotiating and deal-making across both real estate and corporate acquisitions.

9.  Batteries Plus takes pride in delivering “turn key” real estate support, and Moss has made a name for himself with franchisees by helping them secure ideal sites in both urban and rural markets. In addition, the development team at Batteries Plus has promoted Justin Schaper to director of new store development. Schaper will oversee store openings, grand openings, and the crucial first-year support a franchisee receives.

10.  Schaper said, “I have spent over two decades at Batteries Plus – starting as an Assistant Manager at the Oshkosh, Wisconsin store – so I am honored to be promoted to Director of New Store Development. I am looking forward to helping our new owners not only become established in their new stores but also to ramp sales quickly and get off to a fast start. It’s exciting knowing that I’ll be able to leverage the many best practices learned in my previous roles with the company in helping owners maximize their first-year sales.”

11.  Also joining the new store development team at Batteries Plus is Liz Duggan, who holds the position of senior manager of store events and partnerships. Duggan’s efforts are focused on building the grand opening, commercial, and other store events and she works hand-in-hand with local owners to make sure each grand opening is a success.

12.  Joe Malmuth, vice president of franchise development and relations, said, “I’m looking forward to seeing this team continue to make a difference in the lives of our franchisees. I’m also excited that we can keep adding talent to an organization that already has one of the best teams in retail and franchising.”

Closes Out 2021 with Record Signings

13.  In mid-January 2022, Batteries Plus announced the solidification of a record-breaking year in 2021. Significant fourth quarter growth capped off 12 months of success for the retail brand which brought a total of 88 signings and organic growth with current franchisees. Included in the 88 new store agreements were many multi-unit signings including a 10-unit signing for Nevada and Utah, another 10-unit deal in Texas and Louisiana, an eight-unit signing in Atlanta – which officially sold out the market – and a three-unit signing in Long Island.

14.  In addition to the brand’s growth, Batteries Plus ended the year with other company firsts including shattering year-end goals by August 2021, implementing an exit strategy and support program for franchisees, and hosting a first-of-its-kind educational and support workshop for owners. Scott Williams, CEO of Batteries Plus, said, “The past year saw the Batteries Plus franchise reach a rate of growth the likes of which our brand had never before experienced including store signings, openings and even corporate team growth.”

15.  Last year also brought a partnership with Samsung in which the brand became the first retail partner in Samsung’s Independent Service Provider program. The partnership provides Samsung users access to receive best-in-class smartphone repair services at Batteries Plus locations across the country.

16.  In 2022, the brand will continue to put its franchisees first while focusing on making them more profitable. Batteries Plus will continue to take proactive steps to spare its franchisees from inventory obstacles plaguing retailers around the globe.

17.  Williams added, “We are determined to keep our sights set on the most important aspects that will continue to fuel our growth – promoting infrastructure investments that will help our existing franchisees navigate the uncertain environment brought on by the ongoing pandemic, bringing on new owners while supporting the growth of our current franchisees and continuing to bring our unmatched products and services to communities underserved by our brand.”

18.  Jon Sica, chief business officer of Batteries Plus, said, “There have been many positive developments this year and as we reflect on 2021, we can be proud of what we accomplished. The bar has been set extremely high but I am confident in what our brand can do in 2022. By staying true to our core offerings and continuing to support our owners and find the right prospects to help grow our brand, the sky is the limit for Batteries Plus.”

Company History

19.  Batteries Plus (formerly Batteries Plus Bulbs) was founded in 1988 by Ron Rezetko in Green Bay, Wisconsin. Rezetko recognized that the use of personal tech devices was rising and wanted to start a store that sold batteries for these various electronic devices. The concept was a success and in 1992, Rezetko began franchising Batteries Plus. The first franchised location opened in Wayne, Indiana.

20.  Over the next few decades, Batteries Plus grew rapidly as demand for specialty and replacement batteries for personal technology devices increased. In 2007, Batteries Plus was acquired by Roark Capital Group. Under Roark Capital’s leadership, Batteries Plus expanded its offerings to include light bulbs. In 2014, Batteries Plus began offering smartphone and tablet repair services.

21.  Two years later, Roark Capital Group sold Batteries Plus to Los Angeles-based private equity firm, Freeman Spogli & Co. Today, there are Batteries Plus stores all around the United States.

Entrepreneur’s Franchise 500

22.  Batteries Plus ranked No. 404 on Entrepreneur’s 2022 Franchise 500 list.

Section II – Estimated Costs

• Detailed estimates of Batteries Plus franchise costs, based on Item 7 of the company’s 2021 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Detailed information on Batteries Plus’ initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2021 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2018

• Outlets at the Start of the Year:  663
• Outlets at the End of the Year:  662
• Net Change:  -1

2019

• Outlets at the Start of the Year:  662
• Outlets at the End of the Year:  643
• Net Change:  -19

2020

• Outlets at the Start of the Year:  643
• Outlets at the End of the Year:  605
• Net Change:  -38

Company-Owned

2018

• Outlets at the Start of the Year:  57
• Outlets at the End of the Year:  78
• Net Change:  +21

2019

• Outlets at the Start of the Year:  78
• Outlets at the End of the Year:  85
• Net Change:  +7

2020

• Outlets at the Start of the Year:  85
• Outlets at the End of the Year:  95
• Net Change:  +10

Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis

• Under Part 1, the franchisor has provided merchandise margin and percentage of net revenue in total and by customer type based on franchise-owned Stores.

• Under Part 2, the franchisor has provided unaudited statements of net revenue for franchised and company-owned Stores.

• Under Part 3 below, the franchisor has provided an unaudited statement of net revenue, expenses, and EBITDA for company-owned Stores.

• The information below is based on performance during the period from July 1, 2020 through June 30, 2021.

• Information for franchise-owned Stores has been taken from their respective Retail Store Management systems. The franchisor has not audited or verified these reports.

Part 1 – July 1, 2020 to June 30, 2021 Unaudited Statement of Average Merchandise Margin and Percentage of Net Revenue by Customer Type of Franchised Stores

• The following statements are based on information reported by all franchise-owned Stores in operation as of June 30, 2021.

• There were 603 total franchised Stores open as of June 30, 2021. Of these Stores, 2 are small market test stores that the franchisor currently does not offer under the current Disclosure Document.

• The remaining 601 Stores are referred to as “All Stores”. Of All Stores, there were 591 Stores that were in operation for the entire 12-month period ended June 30, 2021 (referred to as “Same Stores”), and 10 Stores opened between July 1, 2020 and June 30, 2021.

• The statements below do not include 8 Stores sold to the franchisor’s affiliates from July 1, 2020 through June 30, 2021 or 11 Stores that ceased operation between July 1, 2020 and June 30, 2021.

• As noted, each category included in this statement specifies whether Same Stores or All Stores are included.

A.  Statement of Average Merchandise Margin for Same Stores

• This statement includes information on the average Merchandise Margin percentage for Same Stores for both retail and commercial customers for the 12-month period ended June 30, 2021. This statement includes information from Same Stores only (591).

• For purposes of this statement, the term “Net Revenue” means all revenues received from the sale of goods and services, whether for cash or by check, credit card, or trade, in connection with the Store, less sales tax, discounts, and customer refunds and returns.

• For purposes of this statement, the term “Merchandise Margin” is Net Revenue less product cost. Product cost is the cost of the product only and does not include other cost of goods sold such as freight, warranty expense, or inventory shrinkage.

• “Merchandise Margin Percentage” is Merchandise Margin divided by Net Revenue multiplied by 100.

Same Store Merchandise Margin (July 1, 2020 to June 30, 2021)

• Number of Stores:  591
• Merchandise Margin Percentage:  52.7%
• Customer Type:  Retail and Commercial

B.  Statement of Average Merchandise Margin for All Stores

• This statement includes information comparing the total average Merchandise Margin percentage for All Stores retail Net Revenue with the total average Merchandise Margin percentage for All Stores commercial Net Revenue for the 12-month period ended June 30, 2021.

• This statement includes information from All Stores (601).

2020 All Store Merchandise Margin by Customer Type

Retail Customer

• Stores:  601
• Merchandise Margin:  58.2%

Commercial Customer

• Stores:  601
• Merchandise Margin:  38.2%

C.  Statement of Average Retail and Commercial Percentage of Net Revenue for All Stores

• This statement includes information comparing average retail Net Revenue and commercial Net Revenue as a percentage of total average Net Revenue for All Stores for the 12-month period ended June 30, 2021. This statement includes information from All Stores (601).

2020 All Store Percentage of Net Revenue by Customer Type

Retail Customer

• Stores:  601
• Percentage of Net Revenue:  72.4%

Commercial Customer

• Stores:  601
• Percentage of Net Revenue:  27.6%

D.  Impact of Commercial Net Revenue Percentage and Cross-Selling Activity on Overall Average Net Revenue

• The statement below examines the impact of Commercial Net Revenue and retail cross-selling activity on overall Average Store Net Revenue based on the results of all franchised Same Stores that were in operation for at least 12 full months as of June 30, 2021.

• The data included below is based on sales activity from July 1, 2020 through June 30, 2021.

• The first chart shows the Average Net Revenue for the 591 Same Stores based on the percentage of total Store Net Revenue devoted to Commercial Net Revenue. That chart shows Average Net Revenue for those Same Stores with Commercial Net Revenue exceeding 35% of total Net Revenue as well as the Average Net Revenue for those Same Stores with Commercial Net Revenue at or below 35% of total Net Revenue.

More Than 35% of Total Net Revenue Is Commercial Sales

• Median Net Revenue:  $1,037,597
• Average Net Revenue:  $1,189,712
• Range of Net Revenue:  $345,060 to $6,743,564
• Average Merchandise Margin:  $565,722
• Number of Stores:  96
• Number and Percentage of Stores Above Average Net Revenue:  35 (36.5%)
• Average Store Age (as of June 30, 2021):  15

Less Than or Equal to 35% of Total Net Revenue Is Commercial Sales

• Median Net Revenue:  $723,405
• Average Net Revenue:  $793,085
• Range of Net Revenue:  $153,358 to $3,276,255
• Average Merchandise Margin:  $429,625
• Number of Stores:  495
• Number and Percentage of Stores Above Average Net Revenue:  212 (42.8%)
• Average Store Age (as of June 30, 2021):  13

• The second chart shows the Average Net Revenue for the 591 Same Stores based on the average number of retail adjusted items (products) purchased per each transaction. The retail adjusted items per ticket are those distinct items or products (versus multiple units of a single item or product) a customer purchased during a single transaction, excluding coupons.

• That chart shows Average Net Revenue for those Same Stores with an average of more than 1.30 Retail Adjusted Items Per Transaction as well as the Average Net Revenue for those Same Stores with an average of 1.30 or fewer Retail Adjusted Items Per Transaction.

More Than 1.30 Retail Adjusted Items Per Transaction

• Median Net Revenue:  $910,207
• Average Net Revenue:  $1,211,433
• Range of Net Revenue:  $424,259 to $6,743,564
• Average Merchandise Margin:  $565,285
• Number of Stores:  81
• Number and Percentage of Stores Above Average Net Revenue:  26 (32.1%)
• Average Store Age (as of June 30, 2021):  14

Less Than or Equal to 1.30 Retail Adjusted Items Per Transaction

• Median Net Revenue:  $718,244
• Average Net Revenue:  $801,301
• Range of Net Revenue:  $153,358 to $3,276,255
• Average Merchandise Margin:  $382,859
• Number of Stores:  510
• Number and Percentage of Stores Above Average Net Revenue:  212 (41.6%)
• Average Store Age (as of June 30, 2021):  13

E.  Average Ticket Sales and Lines Per Ticket

• The data included below is based on sales activity from July 1, 2020 through June 30, 2021 for the 591 Same Stores.

• The “Average Sales Ticket Amount” is the average Net Revenue per transaction for items (products) sold in the Store (excluding coupons, core charges, labor charges, and related items).

• The “Adjusted Lines Per Ticket” is the average number of distinct items or products (versus multiple units of a single item or product) a customer purchased during a single transaction (excluding coupons).

• The chart below includes the Average Sales Ticket Amount and Adjusted Lines Per Ticket by transaction for retail customers, commercial customers, and combined retail and commercial customers.

Retail Only

Average Sales Ticket Amount

• Average:  $42.38
• Median:  $41.40
• Number and Percentage of Stores Above Average:  264 (45%)

Adjusted Lines Per Ticket

• Average:  1.25
• Median:  1.23
• Number and Percentage of Stores Above Average:  241 (41%)

Commercial Only

Average Sales Ticket Amount

• Average:  $190.51
• Median:  $166.13
• Number and Percentage of Stores Above Average:  212 (36%)

Adjusted Lines Per Ticket

• Average:  1.40
• Median:  1.38
• Number and Percentage of Stores Above Average:  254 (43%)

Retail and Commercial Combined

Average Sales Ticket Amount

• Average:  $53.53
• Median:  $51.42
• Number and Percentage of Stores Above Average:  242 (41%)

Adjusted Lines Per Ticket

• Average:  1.26
• Median:  1.24
• Number and Percentage of Stores Above Average:  246 (42%)

Part 2 – Unaudited Statements of Average Net Revenue for the Period from July 1, 2020 Through June 30, 2021

A.  Corporate Stores

• The table below includes the Average Net Revenue for the period July 1, 2020 through June 30, 2021 (“Reporting Period”) for all 99 corporate Stores that were in operation for at least 12 full months as June 30, 2021, including 21 corporate Stores that were acquired from franchisees between July 1, 2020 and June 30, 2021.

• Number of Corporate Stores:  99
• Average Net Revenue:  $913,288
• Median Net Revenue:  $838,254
• Highest Net Revenue:  $2,280,098
• Lowest Net Revenue:  $351,338
• Number and Percentage of Stores Above Average Net Revenue:  44 (44%)

B.  Franchised Stores

• The table below includes the Average Net Revenue for the Reporting Period for 591 franchised Same Stores that were in operation for at least 12 full months as of June 30, 2021.

• As of June 30, 2021, there were 603 franchised Stores in operation. Of the 603 franchised Stores, 12 Stores were excluded because 2 are small market test stores that the franchisor currently does not offer under the current Disclosure Document, and 10 franchised Stores were not open for a full 12 months as of June 30, 2021.

• Number of Franchised Stores:  591
• Average Net Revenue:  $857,512
• Median Net Revenue:  $762,397
• Highest Net Revenue:  $6,743,564
• Lowest Net Revenue:  $153,358
• Number and Percentage of Stores Above Average Net Revenue:  238 (40%)

C.  Corporate and Franchised Stores

• The table below includes the Average Net Revenue for the Reporting Period for the combined Stores (591 franchised Same Stores and 99 corporate Stores) that were in operation for at least 12 full months as of June 30, 2021.

• Number of Franchised Stores:  690
• Average Net Revenue:  $865,515
• Median Net Revenue:  $777,432
• Highest Net Revenue:  $6,743,564
• Lowest Net Revenue:  $153,358
• Number and Percentage of Stores Above Average Net Revenue:  280 (41%)

Part 3 – Unaudited Statement of Net Revenue, Cost of Goods Sold, Payroll, Marketing, Royalties, and Gross Profit for the Period from July 1, 2020 Through June 30, 2021

• The statement in the table below discloses average annual Store Net Revenue, Cost of Goods Sold, and other expenses based on historical information for the reporting period for the 78 company-owned Stores that were in operation for at least 12 full months as of June 30, 2021 and that the franchisor’s affiliate owned for the entire 12-month period (“Company-Owned Stores”).

• As of June 30, 2021, there were 99 corporate Stores in operation, but 21 corporate Stores were excluded because the franchisor’s affiliate purchased these Stores from franchisees during the 12-month period ended June 30, 2021 and did not own or operate these Stores during the entire 12-month period ended June 30, 2021.

• The statements below also do not include 6 corporate stores that closed during the 12-month period ended June 30, 2021.

Number of Stores:  78

Net Revenue:  $869,765 (100.0%)

Cost of Goods Sold:  $443,443 (51.0%)

Gross Profit Margin:  $426,322 (49.0%)

Operating Expenses

• Wages and Compensation:  $142,056 (16.3%)
• Selling Expense :  $14,209 (1.6%)
• Delivery Expense:  $4,979 (0.6%)
• Facilities and Office:  $71,680 (8.2%)
• Admin Expense:  $13,354 (1.5%)
• Marketing:  $43,488 (5.0%)
• Royalties:  $43,488 (5.0%)
• Total Expenses:  $333,254 (38.3%)

EBITDA:  $93,069 (10.7%)

• “Net Revenue” means all revenues received from the sale of goods and services, whether for cash or by check, credit card or trade, in connection with the Store, less sales tax, discounts, and customer refunds and returns.

• “Cost of Goods Sold” is the average of all company-owned Stores’ product costs, including the cost of the product, discounts earned, cost of customer repairs, recycling charges, restocking fees, purchase price variances, redistribution costs, core recovery, tech center supplies, freight in, warranty expense, bulb breakage, and coupon discrepancy. Cost of Goods Sold does not include inventory shrinkage and inventory scrap. Franchisees’ Stores may perform similarly but will be impacted by differences in product category sales mix, inventory management, and operational execution.

• “Gross Profit Margin” means Net Revenue less the Cost of Goods Sold.

• “Wages” include wages (including overtime), sales incentive wages, and payroll taxes for all in-store employees. Included are wages for the Store manager. There are no wages included for any dedicated employee to conduct external commercial sales activities.

• The franchisor presumes that, in a single franchised Store, the owner-operator will either be the Store manager or will be responsible for the external commercial sales activity and will not receive a separate salary or draw from Store Net Revenues. Wages also do not include 401K contributions, group health insurance, paid time off, or commissions. Franchisees may experience similar wage expenses but will be impacted by staffing model decisions (which franchisees alone must decide), market driven pay rate differences, and individual Store staff performance.

• “Selling Expenses” include credit card fees, national account administration fees, and uniform expenses.

• “Delivery Expense” includes vehicle gas, vehicle insurance expenses, and shipping expenses.

• “Facilities and Office” includes business insurance, building rent, CAM, property tax, security, snow removal and lawn care, utilities, and waste management.

• “Admin” includes IT data lines, IT maintenance fee, supplies, and telephone expense.

• The company-owned Stores do not pay a royalty fee and are not required to spend 5% of Net Revenue on marketing (which includes the Digital Marketing Fee). Franchisees would have incurred these expenses. As a result, the franchisor has included these amounts in these tables as if the company-owned Stores had incurred these expenses in the stated amounts, “Royalties” and “Marketing” respectively.

• “EBITDA” is calculated by taking the Gross Profit Margin and subtracting the Total Expenses.

• The company-owned Stores included in Item 19 are substantially similar to the Stores for which the franchisor is offering franchises in the Disclosure Document, and their products and services are the same as those offered and sold by franchised Stores. These company-owned Stores reflect a wide range of demographics and business conditions found in urban, suburban, and single-store markets.

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